The Stock Exchange of Thailand (SET) has been working diligently for over four years to establish itself as the Southeast Asian equivalent of Wall Street. However, recent opposition from the government may jeopardize its plans to become a private entity.
For years, the SET has been pursuing corporatization – transforming the organization into a public company and listing its own shares on the exchange. Advocates believe this move would increase the market’s efficiency and competitiveness within the international capital markets.
Despite these arguments, Deputy Prime Minister and Commerce Minister Kittiratt Na-Ranong, who previously served as SET president, has expressed strong disapproval of the initiative.
“Considering that other markets have undergone corporatization to raise capital, the SET is already in a strong position. I don’t see the need for corporatization,” said Mr. Kittiratt. “If it were up to me, I’d abandon the plan entirely.”
His remarks coincided with the SET’s recent briefing on its new 2-billion-baht headquarters on Ratchadaphisek Road.
Featuring 59,400 square meters of office space and incorporating energy-saving and eco-friendly innovations, the new building is slated for completion in 2013. The project is part of the larger plan to develop Ratchadaphisek into Thailand’s new financial district.
The main structure represents two fish swimming in opposite directions, symbolizing the volatility and uncertainty of capital markets through the Chinese concept of yin and yang.
Chairman Sompol Kiatphaibool stated that the current development strategy involved corporatizing the SET and establishing connections with other regional exchanges to support its long-term growth.
“The previous government was in favor of this goal. If the current administration disagrees, that’s fine. We can still pursue alternative plans to enhance the competitiveness of the Thai market,” he said.
Several Asian exchanges have already undergone corporatization, including the Singapore Stock Exchange and Bursa Malaysia.
Banyong Pongpanich, Chairman of Phatra Securities, warned that failing to integrate with the global market could ultimately result in the SET’s decline.
“Resisting change would essentially mean remaining a domestic trading market,” he said.
Mr. Banyong further explained that corporatization would boost the SET’s efficiency by giving control to the actual owners, creating a clear chain of command. He cautioned that backtracking on liberalizing commission fees, brokerage licenses, and corporatizing the SET could marginalize the market, as foreign investors and large companies would seek capital elsewhere.
Currently, the demutualization process is 70% complete, while the Council of State is reviewing legislation regarding the SET’s transformation.
Pakorn Peetathawatchai, SET’s Chief Marketing Officer, emphasized that the exchange must enhance its efficiency and prepare for global competition, regardless of the outcome of the demutualization process.
The SET index recently hit its lowest point this year, closing at 855.45 points, down 13.86, with a trading value of 34.4 billion baht. The exchange has dropped more than 15% since January and nearly 20% over the past three months.
SET President Charamporn Jotikasthira acknowledged that the market’s volatility is linked to the ongoing EU debt crisis.
“I must admit, the pressure is mounting. The declining market is eroding people’s wealth. Market capitalization has fallen from over 9 trillion baht to 7 trillion so far,” he said.